5. Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement mnethod, bad debt would be estimated at 4% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0-30 days past due at 4%, 31-90 days past due at 19%, and over 90 days past due at 14%. There is currently a zero balance, transferred from the prior year's Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. 2018 Year-End Totals for Organics Plus Credit sales Accounts receivable $1,850,000 600,000 There is also additional information regarding the distribution of accounts receivable by age. Past-Due Category Accounts Receivable Total 0-30 days 31-90 days Over 90 days $350,000 100,000 150,000 Prepare the year-end adjusting entry for bad debt, using A. Income statement method B. Balance sheet method of receivables C. Balance sheet aging of receivables method.
5. Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement mnethod, bad debt would be estimated at 4% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0-30 days past due at 4%, 31-90 days past due at 19%, and over 90 days past due at 14%. There is currently a zero balance, transferred from the prior year's Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. 2018 Year-End Totals for Organics Plus Credit sales Accounts receivable $1,850,000 600,000 There is also additional information regarding the distribution of accounts receivable by age. Past-Due Category Accounts Receivable Total 0-30 days 31-90 days Over 90 days $350,000 100,000 150,000 Prepare the year-end adjusting entry for bad debt, using A. Income statement method B. Balance sheet method of receivables C. Balance sheet aging of receivables method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:5. Organics Plus is considering which bad debt estimation method works best for its
company. It is deciding between the income statement method, balance sheet method
of receivables, and balance sheet aging of receivables method. If it uses the income
statement method, bad debt would be estimated at 4% of credit sales. If it were to use
the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If
it were to use the balance sheet aging of receivables method, it would split its
receivables into three categories: 0-30 days past due at 4%, 31-90 days past due at
19%, and over 90 days past due at 14%. There is currently a zero balance, transferred
from the prior year's Allowance for Doubtful Accounts. The following information is
available from the year-end income statement and balance sheet.
2018 Year-End Totals for Organics Plus
Credit sales
Accounts receivable
$1,850,000
600,000
There is also additional information regarding the distribution of accounts receivable by age.
Past-Due Category
Accounts Receivable Total
0-30 days
31-90 days
Over 90 days
$350,000
100,000
150,000
Prepare the year-end adjusting entry for bad debt, using
A. Income statement method
B. Balance sheet method of receivables
C. Balance sheet aging of receivables method.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education